| Interim Results for the Six Months Ended 30 September 2011 |
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The Board of FFastFill plc (LSE: FFA), the leading provider of Software as a Service (“SaaS”) to the global derivatives community, announces Interim Results for the six months ended 30 September 2011. The Board also announces (see separate announcement) the acquisition post period-end of the trade and assets of Chicago based technology software solutions and consulting business, WTD Consulting, Inc., (“WTD” for a maximum consideration of up to $12.0m (£7.6m) (the “Acquisition”).
Financial Highlights
* Before share based payment charges of £0.1m (H110/11: £0.1m), acquisition costs of £0.1m (H1 10/11 £nil) and exceptional items of £nil (H110/11: £0.2m)
Operational Highlights
Commenting on the results FFastFill Executive Chairman, Keith Todd CBE said: “We continue to make good operational progress both in building out and deploying a global platform for growth. Our SaaS offering continues to gain traction globally, competing strongly and winning important new mandates in spite of the continuing structural shifts taking place in the financial services market. I am excited by the announcement today of our acquisition of the business and assets of WTD: a move that will significantly enhance our US business development opportunities, take our Back Office capabilities into that market, and enhance our Back Office deployments around the world. Changing markets often create uncertainty, but they also create new opportunities for companies that are able to grow and to invest. That is why our focus now rests on leveraging the important investments being made in our global platform and on further expansion of our revenue base. We will look to take full advantage of the new products and opportunities resulting from our recent acquisitions and a strong sales pipeline and remain confident of delivering on our expectations for the full year.”
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Chairman’s StatementThe first half of this financial year can be characterised as a period of operational progress and investment for FFastFill. We have made good headway in further strengthening our global customer base, winning new mandates with globally focused clients as well as extending the scope and range of our work for a number of existing customers. At the same time our investments, acquisitions and partnerships have enabled us to make further additions and enhancements to our product suite, strengthening the global delivery platform that increasingly sets FFastFill apart from its competitors. It is becoming increasingly evident to both the executive team and Board that the platform we have put in place at FFastFill is the right one and that it is a platform for growth. The combination of our global service organisation and our broad competitive offering puts FFastFill in a strong position to continue to achieve growth, particularly at a time when our market is still punctuated from time-to-time with moments of structural change, such as the recent collapse of MF Global. Whilst the macro environment in which we operate clearly remains uncertain, at a micro level we have seen a more stable decision making and budgetary environment in this first half and have continued to win business. It is this progress, coupled with our belief in the medium and long-term potential of our platform that informed our decision to make further investments in the first half. These investments have had a short term effect on profitability; however we do firmly believe that they will deliver new opportunities and additional revenue in future years. The acquisitions we have made over the course of the past three years have played an important part in bringing the FFastFill platform to its current position of strength. Building further on that strength is a key strategic goal for our team and acquisition remains one important route toward realising it. The progress we have made in the first half both in acquiring and integrating the Spread Intelligence business in to our front end platform is particularly encouraging. The combination of the FFastFill product infrastructure together with the Spread Intelligence functionality set is well matched and leverages our two teams’ mutual strengths. Initial market response to the acquisition and its potential has been very positive and we remain on track to secure our first joint customer orders in the second half. Today we also announce our acquisition of the trade and assets of Chicago based technology software solutions and consulting business, WTD Consulting, Inc. The new technology and new team that this acquisition brings to FFastFill will significantly strengthen our Group’s US-based business and enable us to complete the customisation required to take FFastFill’s Back Office product, “Eclipse,” into the US market and open up opportunities in the OTC market. We look forward to working with our new WTD colleagues with whom we already have strong partnership links, to deliver on this important objective. Product integration has already begun with the first joint customer project currently in user acceptance testing. WTD’s capabilities will also significantly enhance our own global Back Office experience and abilities. We move into the second half with a clear sense of how our continued efforts will benefit the Group over the medium term. Our strategic goals remain consistent. We wish to build on the strong SaaS credentials we have earned across our product suite and keep up the work of extending those credentials ever more deeply into the key Asian and US markets. It is clear that our recent Back Office implementations have held back our short term financial performance. Nevertheless, these projects and implementations are an investment that will put us in a strong position to pursue new opportunities this year and next across Asia, Europe and the United States. This, combined with the strength of our pipeline, allows us to remain confident of delivering on our expectations for the full year. Keith Todd CBE
Chief Executive’s Review
The progress achieved in these first six months of the financial year reflect the continued attractiveness of our SaaS-led offering, the ongoing expansion of our global network, and our success in securing new and enhanced customer mandates. In spite of the changes that continue to bed down across our industry, FFastFill has continued to win. The acquisitions made both in this half and post-period end further strengthen our competitive advantage and expands our addressable market. We have reported revenue (excluding nil margin third party licence revenue) slightly higher than the prior period, alongside SaaS growth of 11% year on year. As announced in our October Trading Update, during the half we took a decision to invest in additional infrastructure and expand the Group’s sales and marketing activity in support of growth opportunities outside the UK. We have also incurred additional costs in support of three back office implementations which are shortly expected to pass customer acceptance. The associated costs have not been offset by additional revenue within the period and, as a consequence, adjusted operating profit for the first half does stand lower than this time last year at £0.1m (H110/11: £0.8m). Whilst our focus has been and continues to be profitable growth, we firmly believe that these short-term investments are necessary to ensure long-term success. These investments will deliver a stronger platform on which FFastFill will be able to capitalise on medium-term growth opportunities. We remain confident of delivering on our expectations for the full year.
Further New Business Momentum The underlying growth of our business has continued during the first half, with FFastFill successfully maintaining its new business momentum with wins in both our traditional markets and in those markets where we are focused for the future. Three significant new customers and three extensions to existing mandates were signed in H1, with a further two new customers signed post period-end. We have a solid pipeline as we enter the second half. FFastFill’s expanding presence in Asia continues unabated and our wins in Asia have come from across the functional suite.
Strategic Focus Unchanged In the Over the Counter (“OTC”) arena we continue to pursue our strategy of being a ‘fast-follower’ in the emerging centrally cleared arena. The regulatory evolution taking place around this issue should be further clarified during calendar year 2012 which, once secured, will give those of us operating in this industry a clear view of where and how to create effective technology solutions.
Our Staff Our ability to continue to win new mandates rests on our ability to deliver a seamless, professional and valuable 24-7 service to our global clients. This ability is only made possible by the dedication and commitment of our global employees. On behalf of the Board, I would like to thank all FFastFill staff for their efforts in the first six months of the year and look forward to the new opportunities open to all of us as we enter the second half.
Summary We have made progress during the first six months and our two recent acquisitions take us further toward providing the most comprehensive range of products and services to our global clients in the industry. As we enter the second half our pipeline of prospects is encouraging and we remain focused on executing our SaaS-led strategy. We believe that FFastFill remains well placed to meet the growing and evolving demands of its customers and the Board remains confident that the Group will deliver on our expectations for the full year.
Financial Review
Financial Review Revenue for the six months ended 30 September 2011 was £7.3m (H1 10/11: £7.3m). Excluding nil margin Third Party Licence revenue, which has been discontinued, revenue increased by £0.1m over the prior period. SaaS revenue for the period increased by 11% to £6.1m (H1 10/11 £5.5m) and now represents 84% of total revenues (H1 10/11 75%). The twelve month order book now stands at £13.6m (H1 10/11: £14.5m), of which £11.4m (H1 10/11 £11.8m) is SaaS. The decrease in the twelve month order book compared to H1 10/11 is primarily due to impact of the large back-office implementations that are nearing completion. Recent wins since 30 September 2011 have increased the order book and we remain confident in the outlook for the full year. The recent collapse of MF Global has not had a significant impact on revenues, receivables or the order book as annualised revenues lost of £0.3m are expected to be replaced with new wins resulting from the breakup. The situation at MF Global, which continues to evolve, is disruptive to our industry in the short term but we believe the financial impact on our business will be neutral. Adjusted EBITDA* for the period was £1.0 m (H1 10/11: £1.7m). Adjusted operating profit* was £0.1m (H1 10/11: £0.8m). Total operating expenses in the period before acquisition costs, exceptional items and share based payments were £5.4m (H1 10/11: £4.8m). This increased investment comprised both staff and infrastructure costs. During the period we undertook a Group wide cost optimisation review to drive efficiencies in the second half of the financial year. Amortisation and depreciation remained constant at £1.0m (H1 10/11: £1.0m). Capital expenditure, which stood at £1.4m (H1 10/11: £1.3m), comprised capitalised development, infrastructure investment and refurbishment as we continue to drive the competitiveness of the product set. On 2 August 2011, FFastFill acquired the trade and assets of Spread Intelligence for an initial consideration of £0.3m and 5.1m shares. A further 2.6m shares will be issued as consideration on each of the next two anniversaries of the acquisition, subject to the condition that the founder is contracted as a consultant with the Company at the due date for allotment. At 30 September 2011 FFastFill’s net cash position stood at £1.1m (31 March 2011: £3.3m, 30 September 2010: £1.4m). The reduced cash balance compared to 31 March 2011 reflects the investment in support of future growth, forecast changes to working capital as well as the investment in Spread Intelligence. * Before share based payment charges of £0.1m (H110/11: £0.1m), acquisition costs of £0.1m (H1 10/11 £nil) and exceptional items of £nil (H110/11: £0.2m)
Cautionary statement This Interim Management Report (IMR) has been prepared solely to provide additional information to shareholders to assess the Group’s strategies and the potential for those strategies to succeed. The IMR should not be relied on by any party or for any other purpose. The IMR contains forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. This IMR has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to FFastFill plc and its subsidiary undertakings when viewed as a whole. This report is available in electronic format from the Company’s website, www.ffastfill.com/investor-relations/financial-report
Condensed Consolidated Statement of Comprehensive Income for the six months ended 30 September 2011
Condensed Consolidated Statement of Financial Position for the six months ended 30 September 2011
Condensed Consolidated Statement of Changes in Equity for the six months ended 30 September 2011
Condensed Consolidated Statement of Changes in Equity (continued)for the six months ended 30 September 2011 (continued)
Condensed Consolidated cash flow statement for the six months ended 30 September 2011
Reconciliation of profit for the period to net cash generated from operating activities
1. General informationThe financial information for the year ended 31 March 2011 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Significant Accounting Policies
Basis of preparation The annual financial statements of FFastFill Plc are prepared in accordance with IFRSs as adopted by the European Union. This condensed set of financial statements has not been reviewed or audited by the Company’s auditors.
Going concern The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
Condensed Consolidated Statement of Comprehensive Income Operating profit presented in the Condensed Consolidated Statement of Comprehensive Income and segment result presented in note 3 have been restated to include exceptional items. The nature of these exceptional items are set out in note 4 and these are presented separately as the Directors believe that this is relevant to the understanding of the Group’s financial performance. Previously, exceptional items were presented below operating profit and segment result.
Accounting policies The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.
3. Segmental Information The Group operates in one business; that of the provision of software as a services for use in the global financial markets. The segmental analysis by region is presented below: In line with the presentation of operating profit in the Condensed Consolidated Statement of Comprehensive Income, segment result includes exceptional items. The nature of the exceptional items is set out in note 4 below.
3. Segmental Information (continued)
3. Segmental Information (continued)
4. Exceptional items Exceptional items comprise:
5.Taxation
Any profits made by the group during the period were offset against losses made in previous periods.
6. Basic earnings per share and fully diluted earnings per shareProfit per share is calculated by dividing the profit after tax for each period by the weighted average number of ordinary shares in issue during each period, as follows:
7. Share capitalShare capital at 30 September 2011 amounted to £4,247,877. During the period the Group issued 18,338,242 shares to satisfy share options exercised and 5,116,346 shares as part of the consideration for the acquisition of Spread Intelligence.
8. DividendThe Directors have not proposed an interim dividend (09/10 £nil).
9. AcquisitionsOn 2 August 2011 FFastFill acquired the trade and assets of the Spread Intelligence business comprising the Spread Intelligence software which contain highly sophisticated spread trading tools. Due to the recent completion of the acquisition, the fair values of significant assets and liabilities are provisional and will be finalised during the period to 1 August 2012, as permissible under IFRS 3 (revised).The book and estimated fair values of those assets and liabilities as at 2 August 2011 are set out below.
Acquisition related costs (included in acquisition costs in the Condensed Consolidated Statement of Comprehensive Income for the period ended 30 September 2011) amounted to £75,000. The maximum possible consideration payable is £1.5m, payable over a two year period, and comprises £250,000 in cash and the issue of up to 10,232,692 new ordinary shares of 1p each in the Company (“New Ordinary Shares”) at a price of 12.216 pence per share. The initial consideration comprised £250,000 in cash and 5,116,346 shares (“First Tranche of New Ordinary Shares”). Two additional tranches of 2,558,173 New Ordinary Shares will be issued as consideration on each of the next two anniversaries of the Acquisition, subject to the condition that the founder is contracted as a consultant with the Company at the due date for allotment. The goodwill arising on the acquisition of Spread Intelligence is attributable to the anticipated profitability arising from the expansion of FFastFill's front office product offering.
10. Risks and UncertaintiesA detailed explanation of the potential risks and uncertainties which could have a material impact on the Group's performance can be found on page 14 of the annual report which is available at www.ffastfill.com/investor-relations/financial-reports.
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